Retaining & attracting talent: Startups to give up to 100% raise to top performers

This appraisal season, top performers in a number of startups will see their pay packages double while other high performers will take home increments of 30%-50%-plus.Sreeradha D Basu | ET Bureau | February 05, 2016, 08:40 IST

MUMBAI: This appraisal season, top performers in a number of startups will see their pay packages double while other high performers will take home increments of 30%-50%-plus.

This is in addition to year-end bonuses, accelerated promotions, sponsored family trips, executive programmes to global B-schools, and long-term incentives such as ESOPs and retention bonuses that top talent will get, some startups told ET.

This is despite a spate of layoffs dogging the startup industry recently, and several ecommerce biggies slashing their hiring numbers at leading B-schools this campus recruitment season, as reported by ET last week.

Take the case of food tech firm Faasos, for instance. At a time when several startups in the category are struggling to stay afloat, the 1,000-strong firm plans to reward high-potential employees at the junior-mid level with up to 150% increments, compared to 100% last year, a top official said. Top performers also stand a chance to win a family trip to any location in India.

“We are also offering additional incentives in direct proportion to sales (for the sales team) with no upper limit. ESOPs will be offered to top performers,” said Aditya Adyar, chief people officer at Faasos.

At Prozo, an aggregator and marketplace for all academic content, increments across levels can go up to 100% along with ESOPs and accelerated promotion in as much as six months. “There’ll be a retention bonus for top performers up to 25% of the annual salary along with ESOPs with accelerated vesting,” said Ashvini Jakhar, founder & CEO at Prozo.

Samar Singla, CEO and founder of Chandigarh-based hyperlocal marketplace Jugnoo, said increments for the best can go up to 200% across levels, while average increments will be around 45%. Sponsored vacations, ESOPs, job rotations and role enhancements are also on the cards at the 300-strong organisation that raised additional $2.5 million funding from existing investors Paytm and Snow Leopard in January.

Auto portal CarDekho also plans to give retention bonuses besides offering executive programmes in some of the top global B-schools to some top performers.

According to several surveys, salary increment in India Inc for 2015-16 is projected to be around 10.5%-10.6%, just a notch higher than last year. In 2015, top performers got paid 1.7 times more than those who were average and the trend is likely to persist.

In cash-rich startups, however, sky is the limit.

In December, Faasos raised about $30 million (about Rs 200 crore) from Russian internet-focused investment firm ru-Net. CarDekho is in talks to receive funding from Google Capital; it had raised $50 million in a funding round led by Chinese funds Hillhouse Capital, Tybourne Capital and existing investor Sequoia Capital last year.

Prozo, which employs 25 people, raised Rs 1.37 crore seed funding last September and is in advanced talks to raise fresh funds. “It makes eminent business sense to incentivise the best talent. They will be the ones shaping the path the company takes,” said Jakhar of Prozo.

Compensation experts are not surprised by the huge increments being paid out by startups.

“It’s still a very competitive scenario when it comes to retaining and attracting key talent and increments are a big talent attractor,” said Anandorup Ghose, rewards consulting practice leader at Aon Hewitt. “Unlike corporates, where there is a much more structured system in place, in startups, you have to pay what top performers demand. It’s a business requirement,” he said.

Jaipur-based fashion jewellery startup Voylla, which raised $15 million in fresh funding led by private equity firm Peepul Capital in October, plans to have KRA-based variable components for senior leaders that would be deployed every six months.

At Droom, a mobile marketplace to buy and sell new and used automobiles, highest increments will be 40% compared to around 30% last year. The startup, however, has taken several other initiatives to incentivise top talent, which include spot awards, unscheduled promotions and ESOPs. “This year, we organised trips to exotic locations for our top performing employees, and also gifted them with exciting experiences such as rides in a helicopter and short-distance flights in a private plane,” said Sandeep Aggarwal, founder and CEO, Droom.

Lightbox Ventures and Japanese internet firm Beenos led an investment round of Rs 100 crore in Droom last July.

T N Hari, HR Head at online grocery player BigBasket, said it will offer underpaid high performers up to 50% increment. “We are also likely to offer top-ups to existing ESOPs from this year,” he said. In December, ET had reported that BigBasket is in the final stages of closing a Rs 800-crore round of funding.

Large ecommerce player ShopClues plans to offer around 25% increment to top performers, which is lesser than last year. Shikha Taneja, senior director-HR at the firm, pointed out that its team size has nearly doubled from about 450 last year.

But ShopClues plans to make up for it with retention bonuses and ESOPs. “Earlier our retention bonuses would be about 10% of overall CTC for the high performers. This year, we have revised it to 20% of the CTC and will be giving more ESOPS as well,” Taneja said.

ET view: A tricky affair

A hefty compensation package is a time-tested retention tool. However, as the Harvard Business Review puts it, deciding on compensation policies in startups means making tough choices. That's because every startup also carries a huge probability of failure.

So, there is merit in the view that companies must resist the temptation of hefty cash compensation at the beginning and, instead, raise the benefits when the company grows and becomes financially stable. Deferred cash compensation with stock options is a good idea, and there will be takers too.

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